Z Capital collects $100m for $500m debut fund

The Chicago-based firm's distressed and turnaround fund will target companies in financial services, gaming and consumer products.

Z Capital Partners, a Chicago-based alternative asset manager, has held a first close of $100 million for its debut private equity fund, which will invest in mid-market distressed and turnaround situations.

The firm is targeting a total of $500 million for Z Capital Special Situations Fund and hopes to reach that goal by year’s end, according to a source familiar with the firm. The source said Z Capital plans to have rolling closes on the fund throughout 2009.

Z Capital will invest in secured bank loans to obtain control equity positions in companies. The firm will target companies with enterprise values of less than $1 billion and EBITDA of less than $100 million. Z Capital also will look for companies with hard assets, overleveraged balance sheets and assets in bankruptcy auctions.

The firm is pursuing opportunities in financial services, gaming and consumer products, the source said. Z Capital has not yet made any investments from the fund.

Z Capital declined to comment for this article.

Z Capital Partners was founded by James Zenni, the co-founder of Black Diamond Capital Management, an alternative asset management firm established in 1995. Zenni left Black Diamond in 2006 to start Z Capital, taking six Black Diamond associates with him.